Car and home insurance premiums fall

Latest AA Insurance Premium Index records a drop in prices since the beginning of the year.

The cost of car and home insurance premiums have fallen over the first three months of 2015, according to the latest AA British Insurance Premium Index.

The average shoparound quote for a combined home buildings and contents policy fell by 3.6% or £6 to £158.66 over the first quarter of the year. Over 12 months prices have fallen by 9.6%, or nearly £17.

The average price of a standalone buildings insurance policy dropped 3% to £112.74 (10.1% over 12 months) and the cost of a contents-only policy fell 2.3% to £60.28 (8.2% over 12 months).

The typical annual comprehensive car insurance policy shoparound quote fell by 1% or £5.58 to £530.47 over the first quarter of 2015, while Over 12 months car insurance premiums have fallen by 5.8%

So what’s caused the fall in premiums and will they continue over the rest of the year?

‘Car insurance premiums have to rise’

The AA says the recent fall in premiums for car insurance reverses the 0.2% rise seen in the last quarter of 2014 and the 1.2% rise seen over the three months before that.

It says this may be to do with insurers pricing competitively to build market share at a time when more policies are sold because of new car registrations.

However, the AA is still adamant that car insurance premiums will ultimately rise over the rest of 2015.

That’s because for many insurers the cost of claims is greater than the premium income, which means prices are simply unsustainable.

The trend is starting to show for older drivers.

The latest Index showed premium falls were recorded for all age brackets up to 49. But those aged 50 or over experienced a rise with those aged 70 and up seeing a sharp jump of 5.3% bringing premiums to £387.07 on average.

Janet Connor, managing director of AA Insurance  says new medical reporting accreditation for whiplash injury assessment should hopefully curb ‘out-of-control’ claims spurred on by claims management companies that are putting pressure on prices.

In a survey the AA found 63% of AA members have been cold-called by firms encouraging them to make whiplash injury claims in the past year, with a third contacted more than 10 times.

Conner said: “It’s time consumers understood the connection between premiums and making fraudulent claims.  Car insurance is there to protect drivers in the event of a crash, not as an opportunity to cash in. Insurance isn’t a savings account."

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Good weather, low home insurance premiums

The AA Index shows average premiums for a new home insurance policy have dropped sharply again over the first three months of 2015.

The AA said the falls were greater than expected but reflected the long period of calm weather.

Conner commented: “Home premiums are most likely to be affected by extremes of weather and the recent winter has on the whole, been notable for its lack of heavy rain, snow, winds and extreme temperatures.”

It’s worth noting that not everyone will have benefitted from the falls in home insurance premiums.

The AA admits the figures gloss over regional differences and homes most at risk of flooding will be paying higher than average premiums.

However, the Flood Re scheme, designed by insurers and the government to offer more affordable cover to homes at risk of flood, should help to alleviate this.

It’s scheduled to launch later this year, but Conner warned the fraught negotiations might mean households won’t get any relief until 2016.

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